Soto v. Triumph Construction Corp.

Background

Alexander Soto filed a letter motion seeking approval of a settlement in his Fair Labor Standards Act (FLSA) case against Triumph Construction Corp. Jury Trial and Carlo Cuzzi. The opinion states that the defendants did not oppose the motion. Under the FLSA, parties generally cannot privately settle covered claims without approval from the court or the Department of Labor. The court therefore reviewed whether the proposed settlement was fair and reasonable.

Soto’s complaint sought unpaid wages and overtime wages, liquidated damages, attorneys’ fees and costs, and claims as a third-party beneficiary for failure to pay prevailing wages under New York and federal law. The settlement materials stated that the alleged underpaid wages totaled $419,554.60, with additional claims for $10,000 in wage and paystub violations and $323,000 for retaliatory termination. The settlement provided Soto $115,578.11. The opinion also states that counsel would receive $57,789.05 in fees and $1,632.85 in costs.

Court’s Analysis

The court examined the settlement’s release, other provisions, settlement amount, and attorneys’ fees. It found the release “breathtakingly overbroad.” The release covered virtually any waivable claim Soto had or might have had against the defendants and related people or entities, including claims involving discrimination, retaliation, contract, negligence, and many other federal, state, and local laws. The court explained that an FLSA settlement release must be limited to the claims at issue in the lawsuit or, in some circumstances, wage-and-hour claims arising through the agreement date.

The court found all other settlement provisions fair and reasonable. It specifically found the non-disparagement and non-defamation clause permissible because it allowed truthful statements about the facts underlying Soto’s claims. The court also found the settlement amount fair and reasonable. Even assuming a possible recovery of $752,554.60, the $115,578.11 payment represented approximately 15% of that amount, which the court said was consistent with other approved FLSA settlements.

The court found the attorneys’ fees and costs fair and reasonable as well. Counsel’s compensation was based on $57,789.05 in fees and $1,632.85 in costs. The opinion states that counsel’s hourly rates were reasonable in light of counsel’s experience and the circumstances described in the settlement materials.

Ruling

Judge Vernon S. Broderick ruled that the overbroad release made the proposed settlement not fair and reasonable. The court denied the proposed settlement without prejudice, meaning the parties were not barred by this order from presenting a corrected agreement. The parties had 21 days from the order’s date either to file a revised proposed settlement curing the release problem or to file a joint letter stating that they intended to abandon settlement, after which the court would set a status conference.